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tv   Countdown  Bloomberg  January 11, 2016 1:00am-2:31am EST

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anna: chinese stocks fall as data fails to reassure investors. a u.s. ceo embraces the volatility in a bloomberg exclusive. he said the bank will double its stock in china. anna: wti hits a 2003 low. saudi prepares an ipo that may be limited to its refining empire. manus: good morning. welcome to "countdown."
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anna: welcome to the program. manus, it's monday morning at 6:00. we need to talk about highball. the cost of borrowing the chinese currency in hong kong has increased the most on record overnight. those records go back a few years or so. we are seeing the liquidity impact of the fx interventions which are said to have been conducted by the pboc last week. we are seeing the cost of money get more expensive in hong kong. manus: this is all about china, all about concerns. have we reached a capitulation moment? are your rates overnight for the yuan in hong kong. trying to stop the flow of money in terms of the offshore yuan. let's look at the contagion effect. coming out byey 9%. let's have a look at some of the
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fx boards. 57.8.-rand trading at macquarrie, a combination of stocks and margin calls. mass capitulation. the yen advances to its strongest since august. speculators going net long on the currency. of korean won at the bottom your screen, a five-year low. anna: let's have a look at where the u.s. futures suggest we will be opening later. it looks a little bit mixed. earlier this morning, they were looking all negative. we had a weak day on friday, down about 1% on the major indices. stocks had their worst five-they start to the year on record. let's get the bloomberg news with nejra cehic. nejra: chinese stocks extended 's plunge.
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the producer voice slumped. meanwhile, the nobel prize-winning economist joseph thatitz has told bloomberg china isn't facing a cataclysmic slowdown. he said the turmoil was more about badly designed stock market circuit breakers. ubs will double its stock in china over five years, adding about 600 people. the ceo bets the time is as good as any for ramping up operation. not alone with those challenges. we have to expect some adjustments. those are also good times to plan for the future. that's the reason we are trying to implement our strategic plan in the next five years. we think we are going to double our account in this region. nejra: crude extended its slide from an 11-year low, concerning
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funds that cost the price to the lowest since 2010. the bank of china fueled concern of further weakness. the percentage of manufacturers seeing the u.k. as a competitive location has fallen from 70% to 56% in a year. 39% site uncertainty around the u.k. referendum. lookingmeron said he's to reach a deal next month. catalonia has formed a government dedicated to splitting from spain. it increases the pressure on spanish political leaders. the region accounts for about 20% of spain's output. that is the bloomberg first word news. manus: thank you very much. let's check in on the markets in asia. ingles is standing by. volatility would be the understatement. absolutely.
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you would think the weekend would help somewhat in calling these nerves. absolutely not the case in asia. have a look at what's happening now. it is a sea of red. we are seeing money flow into safe haven assets like the japanese yen. when we woke up this monday morning, dollar-yen was 116. it has crept back up a little bit. the narrative for the fx market is, everything is on the other side of that yen trade. , what can i say, we are still seeing losses right now on top of the 6% losses overall that we saw last week. japan is shut today. it is adding to some of these distortions across volumes in some other big markets like hong kong, australia, where bombings -- where volumes have picked up.
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where one market is closed, a lot of these funds looking to add more liquidity are looking for other places to sell. at the moment, have a look at shanghai, down 3%. hong kong has been around these levels all day. we are actually off the lows of the day right now. last note, some of these markets have fallen quite sharply in the past few days. they are poised for a their market. philippines is a good example. munis out with a note on perhaps what the cost is. moody's is saying a lot of what is happening is really just a reflection of doubt among foreign investors, or global canstors, that china achieve its reforms while maintaining stability. we haven't quite seen that this week. david -- anna: david, thank you very
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much. stocks in china are trading down. asending last week's plunge factory gate price data fueled concerns the economic slowdown is deepening. jason stiglitz told bloomberg that china's recent volatility is a signal that market rules are important. cataclysmic -- it's a slow process of slowing down. there's no real news. what this does remind us is, market rules matter. the way you structure those market rules can either diminish the volatility or increased the volatility. what we're seeing here in a that we a consequence are not well designed as they could be. manus: it's all about the rules then. joseph stiglitz there. let's get to robin, bloomberg
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asia's emerging markets currency editor. very good to have you with us. let's talk about you on. the pboc have put a line under this drop in the currency? they've dropped it for eight days in a row. it would have been nice for me to be able to say there is a floor, that this is a line, but i don't think there is. i think it's got much more room to weaken the currency. 1.3% difference in the onshore and offshore rates in the yuan. the offshore rate, which is free of mainland capital controls, it margaret flexed world opinion of china. unless the pboc achieves some sort of parity between the two rates, they will continue to try and drive down the onshore
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yuan, drive up the offshore yuan. we probably have a little ways to go. the cost of borrowing yuan in hong kong has jumped. how concerning is this? what can it tell us about the onshore-offshore sprint? saying, the pboc is going to continue to do this. if you do not inject liquidity it starves the, offshore market of the chinese currency. going torobably happen. slightly worse, then slightly better, then slightly worse. it is not a fantastic time to bet on the currency. havenis fast becoming a for short-sellers, if you will, with stocks and currency and everything going down. despite so many efforts to bring things back, that's what it's
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looking like at the moment in hong kong. manus: robin, thank you very much. ly, bloomberg asia's editor. anna: let's bring in david stubbs. kickstarting his monday with us on "countdown." what do you make of the moves we saw last week in china? do you think we have much nervousness? how fast does the chinese currency for? david: that is a huge question. everyone is wondering right now. i think gradual depreciation throughout the first quarter. decline pricing in a 6% until the end of the year, something in that range. i share the view of your correspondent that this gap between offshore and onshore needs to be closed one way or another. they can buy the offshore and
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close it that way as well. i think people are reflecting on the devaluation of the yuan in the early 1990's. china was such that the beast. when it reduces its currency like that, it makes me nervous about other emerging markets. this is currency intervention and manipulation of the market at its best. talk to us about the contagion impact. i've got a chart of the dollar, the asia-dollar index. we are breaking trends within the basket. you've got see ny, 40%, hong kong dollar, korean won, indonesian rupee. how much more momentum is there in terms of contagion within the region? let's talk about the
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interbank rate. i think what we're looking at here, i spent a weekend looking at the pboc's balance sheet. they have the ability to do domestic qualitative easing, to offset the domestic effect of this, which is the result of their attempts to balance the external account and keep the currency stable. trying to hold the domestic currency stable is having an impact. to hold the balance sheets stable is my initial conclusion of how to deal with that. i think you have absolutely thetion marks over sustainable growth rate of this region if china is slowing down under 5% as some people think. furthermore, you have lingering
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credit concerns. you have seen a significant credit cycle in this region. if you have even an average nonperforming loan cycle, what kind of effect does it have? are these credit rating agencies looking at malaysia to be downgrading the outlook? there is a possibility this starts to feed in itself and you get questions over those governments. domestic qe look like in a china context? manus: what china did in the 2000's was, there was capital inflows. they had to create renminbi to buy dollars to hold down the currency, to sterilize it by selling bonds to the private sector, to suck the money out of the system. all that is going into reverse. what they are having to do to sell the dollars, they get the renminbi pack, and that is against the balance sheet and
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the balance sheet starts to fall. the pboc balance sheet is falling right now. you can just create more renminbi and buy something domestically. stresses in the interbank market in the united states during the crisis. the fed flooded the system with liquidity. i think a more domestically-focused operation by the central bank is where we are heading right now. manus: david stubbs stays with us. here's the week ahead for you. we hear from fed voices. dennis gives us his view on the u.s. economic outlook. that is 5:40 p.m. u.k. time. anna: we also hear from robert kaplan. tomorrow, president barack obama delivers the state of the union address. manus: thursday, we will get the rate decision from the bank of england and the ecb will publish the account of its december
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meeting. anna: up next, wti hits a 2003 low. we look at what company might be for sale. ♪
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anna: welcome back. let's get the bloomberg business flash. nejra: ubs will double its staff in china over five years, adding about 600 people. the ceo that a time of volatile anyets is as good a time as for revamping the operations. >> i think we have to expect some adjustments for 2016. those are also good times to plan for the future. that's the reason we are starting to implement our strategic plan in the next five years. we think we are going to double our account in this region.
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volkswagens ceo says the carmaker continues to view the united states as a core market. it comes ahead of meetings this week with u.s. government officials. matthias mueller was speaking at the north american international auto show in detroit. have let know that we our customers, authorities, regulators, and the general public here in america 20. we are, i am, truly sorry for them. i would like to apologize once again for what went wrong with volkswagen. nejra: twitter shares have fallen to an all-time low, just months after cofounder jack dorsey took the helm. since 2013, the company has disappointed investors with slowing user growth and sales.
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while dorsey aims to turn it around, the moves haven't yet affected the company's numbers. investment banks are lining up for what could be the biggest ever idea. sources say jpmorgan, hsbc, and deutsche bank are trying to win a role in an offering of aramco. that it isconfirmed considering selling part of the business. for more on these stories, terminal clusters can head to top go. let's get more on that with elliott gotkine. sliding oil prices. it is not actually the most valuable bid. it is all about the refining side of the business. elliott: that's right, manus. saudi aramco is the crown jewel of saudi state assets. they control more than 1/10 of the global oil market.
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they control some of the world's biggest oil fields. perhaps surprising that the saudi authorities may not be inclined to ipo that bit and may go for some of the subsidiaries. that is something the crown prince talked about. the refining business may not be worth trillions of dollars. still not too shabby. you are talking about the world's fourth biggest refiner. it is processing oil that it directly controls, more than 3 million barrels a day. it wants to be number one by 2025. one of the way they are trying to structure these refineries is that these refiners would buy saudi oil, helping saudi arabia maintain market share. a couple of caveats here. valero is a u.s. refiner. $35 billion, even though it
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processes around the same amount of oil that aramco does. aramco doestime, have experience with ipo's. saudi's rushing to get a slice of their country's oil industry. as prices have declined, that valuation has declined by more than a half. not in the trillions of dollars, but still not too shabby. on the board, a question of where the oil price go es. brent and wti both on the slide. any clues to where they are heading? elliott: we've seen some hedge fund bets. seems to be a good indication of where they are going. bullish bets fell by a quarter in the week ended january 5. if you look at the top line, in yellow, is the wti or u.s. traded oil. the bottom line, the blue one,
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that is bullish bets on oil. pretty much, where bullish bets have gone, oil prices have followed. specifically that precipitous decline. although hedge funds don't get things right on everything, they seem to be spot on when it comes to bullish bets on oil prices. manus: thank you very much, elliott gotkine. david stubbs is still with us. looking at the chart that elliott brought up, the push lower, lowest since 2004, and traders are running for the hills. david: in terms of positioning, yeah. i think that we are still in a structural supply in the oil market. the force is in disarray. we've seen that in the news this week. estimates, the glut in
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supply is only going to get worse. i don't know where it's going to go, a dollar here or a dollar there, but i don't see a recovery above 50 by the end of the year. ap ofk that we are in global demand growth. causeof it tempered the it is mainly focused on services. you have global manufacturing, also dragging energy demand. anna: interesting story about aramco. what does itader, mean for global oil markets? would it be likely to change the saudi stance on going for market share? david: absolutely. that has been one of the key drivers. i don't think so. what is the point in throwing in the towel now, without really flushing out the competitors? i think the saudi's are making all the noises of shoring things
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up for the long term. they've had a fiscal plan to cut back their deficit. at ahey are looking selloff. it seems strange to me to ipo an oil business when oil is down here. it would have been worth more at $100 a barrel. they are looking at their assets and seeing how they can bolster their current income. manus: the bloomberg story this morning is that their dexterity is about feeding the chinese demand in terms of petrochemicals and other products in the refining process. all about the long-term. let's talk about the ruble. the most accurate forecaster sees a turnaround in the batter brutal. they say maybe it's time. they see a 67 to the dollar in the next three months. .ub $50 oil
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is there any reprieve for the ruble or are we getting used to lower oil and the worst is already priced into the ruble? david: now you have to start looking at these oil derivative plays. tolerance, the risk you have a fairly long-term horizon, i think you can add into pro risk portfolios things like equities. it is not just where the ruble is. the valuation is incredibly cheap right now. they've been down here for pretty much most of the year. appropriateably not for a lot of investors, -- manus: high risk investors take them. david: i think you have to start adding some exposure. anna: david, thank you. david stubbs stays with us. manus: next, the long road to redemption. matthias mueller embarks on his
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first official trip to the u.s. as the volkswagen ceo. he pledges to make things right. will the strategy work? we will discuss that next with hans nichols in berlin. ♪ . . .
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inus: 6:30 in london, 7:30 brussels. >> chinese stocks have extended last week plunge as new price data you concern that the slowdown is deepening. the consumer price index slumped 5.9% in december, extending declines to a record. joseph stiglitz has told bloomberg that china is not facing a cataclysmic economic slowdown. he says last week's turmoil was more about badly-designed stock market circuit breakers. the cost of borrowing u.n. has jumped the most on record. following suspected intervention
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by the chinese central bank. ubs will double its staff in china, adding about 600 people. marketsbets volatile are good for ramping up operations. >> china is not on its own with those challenges. we have to expect some adjustments for 2016. these are always good times to plan for the future. tot is why we are starting implement our strategy plan over the next five years. we think we will double our account in this region. told hisng-un has military scientists to work harder to boost the country arsenal of weapons. it claims after the secretive state claims to have tested a hydrogen bomb. the u.s. doubts it has the required technology. the u.s. lottery jackpot is up for grabs after nobody matched all six numbers. the total prize is now an
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estimated $1.3 billion and is only expected to grow ahead of wednesday. the odds of winning the big one to 1.re than 292 million anna: thank you very much. let's check in with what the markets are doing. caroline hyde has been looking at the details. caroline: risk aversion across the board. the msci asia-pacific the lowest since october of 2011. australian energy companies and mining companies being hit hard today. off by more than 2% at the moment. have a look at my screen. 46 straight months of falling producer prices. this is a deterioration. this is what we are seeing sparking the concern today. over the weekend, that data coming out of china seeing the december, a 5.9% in
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record 46 months of declines on top of the manufacturing and exporting. at a greata look chart that has to do with volatility. this is the chinese benchmark. oncee seeing a spike up again in the volatility. in particular, it is over the 10-day average. we are seeing that growing to the highest since december. -- september. volatility nervousness in the market when it comes to volatility. we are getting the yuan stabilization. after eight straight days of weakening, you are seeing some stabilization. this has been the dollar rally. coming down ever so slightly. we are seeing a little bit more of a stability in the yuan.
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lastly, you have got to keep in mind what happens to the south african currency. such phenomenal risk aversion when it comes to the rand. a combination of stops and margin calls causing mass capitulation. oft a jump we saw in terms dollar versus rand. back to you. manus: thank you very much. volkswagen's ceo says they continued to view the u.s. as a core market. country visits the after continued battled with -- battles with regulators. for more, let's get to hans nichols, who is in berlin. are they any closer to a technical solution to satisfy the u.s. environmental protection agency? hans: they may be there. they have developed a new catalytic converter that could fix about 430,000 of the 480,000
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vehicles. there were reports on this over the weekend. he just confirmed it to reporters after his speech at the auto show. in some ways, the challenge is much more than a simple epa fix and he seemed to hint at this in his speech. >> are most important task in 2016 is to win back trust. it is not only our cars we have to fix. we know we have to repair our credibility. after detroit, he will be heading to washington, meeting with gina mccarthy, the head of the epa. the head of the regulator that has caused so much heartburn for volkswagen. the 8.5ear that, for million vehicles in europe, relatively easy. they still have to get there in the states. we will see if this new catalytic converter will get them there. we have figures for the entire year.
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you look at what has happened to the volkswagen namesake brand, down almost 5%. they sold 5.6 million vehicles. month of december, they were down the most. you look at the entire volkswagen group, they were down below 10 million cars. but is about dieselgate, also russia, china, and the slowdown in brazil. talk about ces. they showed off the battery-powered car in las vegas. what does he have to say about that side of the business? hans: they are committed, even if it costs money on the investment front, to have an electric and hybrid fleet. they will have 20 new offerings by 2020. they are talking about revamping the tiguan. they also -- on the idea of spending $900 million to upgrade the factory where it will be produced in chattanooga, tennessee.
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tiguan,r comment on the they will unveil a new version at the delhi auto show. i cannot think of something that i would rather do in february. you and i could go report it together. we could do an auto show in delhi. maybe we will take the new t igu an out for a spin. what kindo not know of life you think i lead in terms of cars. anna: you are not doing anything to change his thoughts about your life, are you, the luxury nature of it? david is with us in the studio. your thoughts on the data. it is something we are going to be focusing on this week with the motor show coming up. is that something you are looking to play? david: an awful lot of disruptive change. the black swan
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event in european equities last year, volkswagen, and everything else. sector,ion within the you have the disappointments in emerging markets about the growth prospects there. at the eurozone and the united states, you are still digging out of a per where car prices are abnormally low. iod there is still pent-up .emand the focus on the domestic core markets should be fine. there is no doubt that they get in the european equity market when china has a bad day. manus: we are trying to make sense of these moves. 9% move in the rand overnight.
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hugely-volatile moves. the yen at its strongest level since august. , the right inelds china and the deflation story in china, how that is impacting us. global bond yields hitting and eight-month low. does this trend continue for 2016? how do you look at the global disinflation story from china? david: the main linkage is the disinflation and pulse into the western world. it pushes a lot of central banks back in terms of their decisions to raise rates. there are other people who think maybe four. it puts the bank of england back as well. you get this laser focus on the rest, which harms of emerging markets. so you get the double whammy. we are still underweight emerging markets.
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think even though bonds look rich, you need some in your portfolio. they can play this role. opportunity with u.s. investment grade. you saw the spreads widening quite a bit last year. partly an energy stored. actually, it is the enormous amount of supplies. we think default risk is very low. it is one of the things i like. risk you say the default is very low. you have to be specific about the individual nature. you are not just buying a higher basket. i want to distinguish between investment grade at high-yield. grade is much larger companies, larger issuances, , stille credit ratings
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being somewhat selective. i am not sure i would buy an etf , but a large part of the index is absolutely fine. high-yield is a more risky proposition. anna: you working on that last time. david: we do think this is a buying opportunity. in our multi-asset portfolios, we are going high-yield rather than equities right now. we think we will get equity-like return but less volatility. the covert -- the correlation between equities and bonds is not as low as it was. on the high-yield space, european high-yield is one of our top fixed-income strategies. manus: going beyond equities. david stubbs stays with us. the boss of ubs says that this volatility on the markets is good as any for ramping up his operations. anna: speaking about strategic plans for the next five years, sergio ramadi told -- ermotti
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told us they will be doubling staff in china. difficult to try to forecast the full-year. i am pleased with our stock performance in 2016. i think that we clearly inperform all of our peers the first few days of the year. we have to put it into context. risk aversion is still a thing. negative rates in switzerland, in europe will play a role. on the other hand, we expect which rates in the u.s., should compensate. overall, it will be a challenging year. strategically, we are well-position. work,ieved all our building up capital, restructuring the firm. we are prepared to tackle those challenges. also, exploit the opportunities that this kind of volatility
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creates. >> what is the key opportunity? >> in times like this one, clients are looking for device. relationshipsterm is very important for us. as i mentioned before, client risk appetite is very low. what we tried to do is to stay close to our clients. >> regulation is a huge cost. what other chunks of regulation are still outstanding for you this year? >> i think we have clearly to complete this migration in the , the creation of the company. what we have done in the last 24 months, the biggest milestone has been achieved and completed. ourselvesf preparing , we are very confident
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that we will execute. >> you probably have not seen any of your investment bankers watching this interview right now. how does the compensation pool look this year? >> they are going to find out in a few weeks. >> is it about flat? >> i do not like to comment on compensation. our goal is to pay competitively for performance in a balanced way between the interest of our shareholders and the employees for the long-term. >> how about room for dividend growth? >> our policy is a policy of .rogress and growth it is quite clear that we say to , we give themrs at least 50% of our net profit. we have all the intentions to fulfi our commitments. ramadi -- ermotti,
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ubs.eo of the shanghai index extending its drop this morning to 5%. potentially allowing this market to find a little bit more of a balance. money going into bonds and the yen. that is the classic haven trade. anna: up next, why a threat of a brexit is putting manufacturers off of the u.k. ♪
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anna: welcome back. this is "countdown." let's get the bloomberg business flash. >> ubs will double its staff in china over five years, adding about. ermotti gets aio
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volatile market is as good a time as any for implementing changes. >> we have to expect some kind of adjustments for 2016. those are all good signs to and for the future and a reason why we are starting to implement our strategic plan in the next years. we think we are going to double our account. >> volkswagen's ceo says the carmaker is sticking to view the united states as a core market. the company had a critical meeting this week with government officials over the emissions cheating scandal. he was speaking at the auto show in detroit. >> we all know that we have let down customers, authorities, regulators, and the general public here in america, too. am, truly sorry for that. i would like to apologize once
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again for what went wrong with volkswagen. on the partners, the $965 million london hedge fund whose bets against china helped it be the industry last year, says the yuan may fall 50% in 2016. the credit currency would have to drop to 7.5 per dollar to meaning the reverse its depreciation according to the on the head of strategy. upestment banks are lining for what could be the biggest-ever ipo. sources say jpmorgan, deutsche are in the lead for aramco. that is your bloomberg business flash. for more on these stories, head to the terminal.
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manus: halo percent of isufacturers think the u.k. a good place for manufacturing. i caught up with ceo of illustrious lot -- ya yachtacturer -- manufacturer and here is what he had to say about the subject of brexit. >> the european market is very nimble to us. doing is making sure that we naturally hedge against risk. it is important that we have business in a number of different currencies, a different number of geographies. of course, making sure a strong europe is important to us. now is the ceos of quiz net capital partners.
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still with us is david stubbs. richard, good to see you on the program once again. we are gradually hearing what businesses think about the brexit. some want to speak about it and some do not. you have been around the timing of the brexit votes earlier in the weekend. david cameron suggesting this could happen by june. what are the chances? he wants to secure a deal by february. if he cannot, he will go in june. there is lots to resolve. he talked about a win-win yesterday, but the real win-win is that we can leave the eu but still have access to the free trading agreement. he does not talk about that. and the risks of staying in. mendelson wrote an article in autumn and he said, this is a delusional aspect that
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you guys are propagating, which is that free trade agreements take time. say itng to the plan you will be a snappy thing. i think, to coin a phrase, probably deluded. richard: he also said the british people should not have a vote because they cannot be trusted to vote the same weight. the eu has just signed a free-trade agreement. it has an obligation to negotiate. manus: do you think it has anything to do with why other people would want to sign agreements with the u.k. as a jumping off point. over 100 exports billion more than we export to them. it is massively in their interest. german carmakers will be knocking down the door of angela merkel the day after a brexit vote to leave. they will be saying, we do not
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want any tariffs imposed on our cars. anna: bloomberg intelligence has done research that suggests membership has brought a 10% uptick in trade and that that would be a risk if they left. richard: how could it be a risk? manus: after 2008, it was worth some 20% and that being part of the eu was a benefit in times of crisis. that if it is this myth you are not part of the eu, you cannot trade with it. the point is, we will still be able to trade with the eu. nothing will change. terms will change. it will have to be under most-favored-nation status. most of the eu's 1.7%. it is nothing compared to the
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fluctuations that you see on currency markets. businesses -- are businesses and investors shying away from u.k. assets? richard: we are far away from the vote that other people have is on their mind. you need to focus of global investors to be on this issue. and it will not be more than a month before this actual vote. , in we do get that close think we will see the sterling go lower. evaluation on equities in the u.k., will have to be marked down. richard could be right. we could have this free-trade agreement which leaves the economic relationship similar to what it is at the moment. no one knows that. neither does anyone else. afford uncertainty will a lower valuation thesis in the short-term. this is a much bigger longer-term decision than what
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happens over a couple of months in the markets. people need to keep that in mind. the next 5, 10, 50 years, not the next couple of months. richard: there is so much uncertainty about the growth of the eurozone countries and what higher contributions the u.k. would have to make. the greater rules and regulations centralization that will happen, and the uncertainty of the additional restrictions on the city of london. those are the things that should be weighing on city business is -- businesses. this on by we get june? importantt is such an decision, we need to take the appropriate time. and we will vote to leave. anna: thank you very much. up next, shanghai composite was down well over 5% just a new moments ago. fears over the slowdown in china extend last week's global equity
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manus: the selloff continues. chinese stocks all as asia ails to reassure investors. the hang seng slides below 20,000 for the first time since 2013. anna: ermotti --. the ubs ceo embraces the volatility. he says the bank will double staff in china. low.: wti it's a 2003 may be limited to its refining business. morning.
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it is "countdown." i am manus cranny. i am anna edwards. let's talk about where the markets are selected to open. it looks like we will have a weaker start to the trading day. a lot of tension in the asian session. we saw 4%, 5% taken off some of these major indices in china. the cost of borrowing the yuan in hong kong increased by the most on record overnight, spiking up above 30%, just reflecting the nervousness in terms of banks lending to each other in the hong kong market and the cost of borrowing. tous: this takes you back 2007 where there is the in the unitedx states and the united kingdom. --there is real distrust the between the banks. in oned plunged by 9%
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session, the most in seven years , before ending the day down by 2.4%. a lot of theirld exports to china. options show that sentiment is at the worst for the dollar against the yen. low.on hitting a five-year global funds pull live hundred $50 million out of the won. bloombergs get the first word news now. chinese stocks have extended the plunge after concern that the slowdown is deepening. the producer price index extended declines to a record. ubs will double staff in china over five years, adding 600 people. bets the time ceo a volatile markets is as good as any for ramping up operations.
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>> china is not on its own with those challenges. we have to expect some kind of adjustments in 2016. those are also the good times to plan for the future. that is the reason why we are starting to implement strategic plan in the next five years. we think we're going to double our count in this region. crude has extended its , the from an 11-year low lowest since 2010. the bad data out of china over the weekend field concern of further weakness in the world's biggest energy user. catalonia has formed a government dedicated to splitting from spain. it increases the pressure on political leaders to find a way out. --a: manus: let's check in on the market with david ingles. we have the hang seng on the
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move. take us through the day's trade. david: there is no way to describe really what is happening. you have to take a look at some of these losses. it is not funny anymore, really. shanghai composite down over 5% into the close. depending on which benchmark you look at, it is much worse for smaller caps. they have about an hour straight left in hong kong. it tends to get worse when china shuts and we continue to see pressure. i will update you guys on what is happening there. you would think that the weekend investors calm nerves. that is not the case. have a look at what is happening across asia. still very much risk-averse. japan is shut today i'm so futures are taking a massive hit. --225to 25 futures
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futures, which i will show you in just a moment. a lot of it is down to what caused the selloff last week. we have uncertainty over a few things in china. uncertainty over how china plans and how china is expected to respond to this continued deterioration of data coming out of beijing on the economy. renewed concerns over the shared sales -- share sale. a note from moody's today. cannotubt that china pursue its economic reform agenda and market reform agenda while keeping things stable because in six trading day so far this year, we have yet to see that happen. a lot of analysts expect this to theinue while we see
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absence of signs of stability coming out of the chinese economy and the chinese market. anna: we have some breaking news. manus: this is on electrolux. caroline has the details. ceo stepped down with announcements that he plans to refine -- to retire on february 1. this is a man who have -- has been at the helm for five years. have a look at what has happened to the share price since he has become the head of electrolux. share prices rally, but not in the last few months. this is an appliance maker, whether it be a vacuum in her refrigerator, these are the sort of products that this company makes. unable to push through some of the m&a they have been wishing to do. withstatement, he said, this entire electrolux team, we substantially increased investments in consumer-led
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innovation. being passed on to jonah samson -- jonas samuelsson. he was head of electrolux major appliances in middle east, europe, and africa. now he will take the leadership for the entirety of electrolux on the first of february. anna: stocks in china have extended last week's fall. concerned that the economic slowdown is deepening. a nobel-prize-winning economist said that the recent volatility it is a sign of slowing. >> it is not cataclysmic. it is a sign of slowing down. what it reminds us is that market rules matter.
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the way you structure those market rules can diminish the volatility or increase the volatility. what we're seeing here, in a sense, is a consequence of some market rules that were not as well-designed as they could be. manus: let's speak to enda curran. good to see you. china keeping the yuan reference rate steady for the second day. let's be frank about it. hibor is hiking to the highest level we have seen on record, over 13.5%. when you see it spiking the way it does, it really flashes danger. the question is whether today is it isoff blip or whether .ith us to stay it will be interesting to see how chinese authorities respond. what we do know is we have
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another example of an unintended topic, spillover after spillover. chinese regulators are trying to get a grip on what is happening in the stock market. in some ways, they made the problem even worse. china wants to loosen up and have the market have a greater say, but they are causing tremendous volatility. this spillover and contagion effect is slowly starting to increase. hibor in hong kong is one to watch. anna: and to the stock market, 's, what isthe qqq driving the pessimism? enda: there is just no end to the negative on china right now. the stock market selling off again. we know some of that is being technically driven. there is a ban on big shareholders selling. that is continuing to be an overhang on the market.
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of course, we know that some economic data, that is not exactly new news either. despite negativity on the market, the underlying economy showing some signs of stabilization. real estate prices are holding up ok. we see that consumer holding up demand start low to stabilize. over the coming days, we have a new raft of data. that will tell us whether or not the stabilization story on china's economy is gaining traction or whether it was a temporary blip. thank you very much. let's bring in our next guest. of flowobal head strategy at socgen. let's get to the china story. we have had eight days of where the chinese produced the
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reference -- reduced the reference rate. the lending rate between the bounces is 13.5%. is,first question to you are you worried about bank lending? are the banks fearful? or is this a manipulation of the market? >> it is clearly a risk indicator and showing that the tension within banks and this has driven consistence in the equity markets. china still has a lot of room and tools to stabilize its economy in the markets. it is not the first time that we are hearing about the chinese crisis or doom scenario. the past three years, we had these spikes. the underlying theme is the
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slowdown that the government is trying to manage. it is obviously not going to be stable over the next few years. anna: is it significant that the hibor is spiking higher than a spike in august of last year? if that is what this is, it is interesting that we start off 2016 on this measure, in a weaker place that we were? >> absolutely. quote that long periods of instability are stabilizing. createsimately volatility and instability. but it is part of the process because china needs to reform and adjust its economy. manus: two things come to mind. david is with us from jpmorgan.
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that their toolbox is still plentiful. reserve requirement cuts. domestic qe, is that something that socgen things could be a solution? acknowledgetely that china is going to rerm its economy, going from an export-driven economy to more of a domestic, consumption-driven economy. qe gives the consumer more purchasing power. you have measures like cuts in the car sales tax from 10% to 5% for vehicles of 1.6 liter engines or lower. ultimately, they have no choice but to boost domestic capacity to offset some of the export-driven weakness that we are seeing currently. anna: one of the tools is cutting the exchange rate further.
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is that likely? if so, how quickly does that happen? how long-term a story is that? >> i think that is what they have already tried to achieve. ultimately, with the inclusion of the yuan, they have commitments to have a stable currency. otherwise, investors lose confidence in their currency, that can obviously create a snowball effect. we ultimately think that the currency is likely to be more stable going forward than it has been over the past couple of weeks. manus: you will stay with us. some very sad breaking news coming in. from david bowie's facebook terminal. anna: david bowie has died peacefully today after a courageous 18-month battle with cancer, so says a statement on his website. you are watching "countdown."
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we will take a short break.
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anna: welcome back. you are watching "countdown." the southep an eye on african banking sector, we have had some big moves in the currency overnight. a significant weakening of the south african rand is weighing on south african banks this morning. .eep an eye out manus: old mutual has one of the biggest exposures. we finished the day down 3% in terms of the grant. keep an eye on angela merkel. it has its own separate issues in the mining space but has a major exposure in terms of south africa. anna: here is caroline.
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caroline: ubs will double its staff in china over the course of the next years, adding about 600 people. ist is as sergio ermotti volatile markets are as good a time as any to ramp up operations. ex we have to expect some adjustments, but those are good times to plan for the future. we are starting to implement our strategic plan in the next five years. we going to double our count in this region. caroline: volkswagen's ceo says the carmaker is sticking to investment lands and continues to view the united dates as a core market. it comes ahead of a critical meeting this week over the commissions cheating scandal. he was speaking at the auto show in detroit. know that we have let down customers, authorities, regulators, and the general
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public here in america, too. am, truly sorry for that, and i would like to apologize once again or what went wrong with volkswagen. caroline: investment banks are lining up for what could be the biggest-ever idea. jpmorgan, hsbc, and deutsche bank are positioned to win a role if saudi arabia goes ahead with the offering of aramco, the world's largest crude producer. they have confirmed that they are considering selling part of the business. for more on those stories, terminal customers can head to topgo. manus: let's get more on the potential for the aramco ipo. let's talk about aramco. all things shifting.
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11-year low. what a time to go for an ipo. if they go. questions is why would you do it now with oil in the doldrums? we have this new deputy crown pants -- crown prince who wants to shake up the country. he is keen to be seeing to modernize the economy. and i feel would be a very important symbol that things are changing. anna: does this rub up against the story of oil prices? part of that is because of the decisions that have been made by the saudi administration. does this change their thoughts about the oil prices? say thatrd some people maybe they think that oil is never going to rise again. obviously, the decision would be
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taken inside the kingdom right now if they thought that. manus: there would be some rather extreme social reaction. crude extending its slide, 11-year low. hedge funds are cutting their bets are the most since 2010. this story in terms of the bandwidth of oil, are you to the left of 30 or to the right of 50? >> we are ultimately to the right of 50. happening is a question of debt and leverage. through the qe periods of the u.s., there has been rushes -- record issuance of a high-yield credit. leverage, the higher the probability of default. i think this is number one affected. we will see russia continued to export because the drop in oil is offset by the collapse in their currency.
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in ruble terms, it is still profitable to sell at these levels. they need to balance their budgets at a record deficit. it is slightly political around oil. you mentioned the numbers there. you have seen quite a lot of demand before. what is the thesis behind calls for oil? >> the higher-cost producers in the u.s. ultimately will be taken out of the market. that is how the balancing effect will occur. they are the ones changing the dynamic and the supply and demand for this market over the past few years. over the long run, we expect those suppliers to reduce production and ultimately balance the demands. you the mentioned to shift from the hedge funds. are they necessarily the benchmark in terms of where we
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are? about all speaking capitulation of markets. what is really going on in the oil market at the moment? what are people saying in terms of positioning? >> there are two important things right now. china has scared a lot people. in the past, this was the supply story. it was all about the saudi's trying to drive out high cost countries. this lack of a winter in the northern hemisphere has been a hammer blow to the oil market and it continues to be so. stubbse talked to david from jp morgan and he was saying they did not see any reason because the whole point of the strategy was to squeeze out other suppliers. how long do they have to keep doing this until we see enough
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of those suppliers back away from the market. >> the problem is that this whole process has left inventories globally at a record high. it will take many months to work through those inventories. showsarabia, their budget that they were preparing for the oil crisis for quite some time. they have very deep pockets. most people feel they are committed through this year and expect to see results towards the end of the year. consequences of oil have ramifications in the bond market in terms of emerging-market current and the global disinflation story. , let's pick upnd some of those. we have the ruble. is there any reprieve for oil-related currencies and have you any temptation to take any ruble risk?
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>> re-think the oil price was stabilize over the next 12 months. we do like traits around the , for example, or integrated oil companies that have the upstream and downstream. the point that is important to remember is the leverage to force a lot of these companies. --y are taking actions using capex.ing you are likely to see free cash flow surprising to the upside because of all the cost measures they have taken. anna: and they keep paying dividends as a result. >> yes. it will probably be higher than people would expect. anna: that is the difference from the mining sector, where we have seen some of the mining bosses take away their dividends. thank you for joining us.
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manus: futures are set for a lower opening. london down .7%. south african banks are under pressure. keep an eye on anglo american. and there is a shot of the city of london. ♪
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guy: welcome to "on the move." we are counting you down to the european open. i am guy johnson. here is your morning brief. as dataoff continues fails to reassure investors. the hang seng is below 20,000 for the first time since 2013. oil is also under pressure. wti hitting and 11-year low. saudi is preparing an aramco ipo. and a manic monday for the rant. south africa's currency plunges as much as 9% in a volatile hitting 1

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